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Teva settles Medicaid false billing case tied to Chicago doctor

March 11 (Reuters) - Teva Pharmaceutical Industries Ltd agreed to pay $27.6 million to settle charges that it paid kickbacks to a Chicago psychiatrist to induce him to prescribe an anti-schizophrenia drug to patients, resulting in more than 100,000 false Medicaid and Medicare claims.

The world's largest generic drug manufacturer will pay about $15.5 million to the federal government and $12.1 million to the state of Illinois, according to statements from the U.S. Department of Justice and Illinois Attorney General Lisa Madigan.

Tuesday's settlement resolves charges that two Teva units, Teva Pharmaceuticals USA Inc and IVAX LLC, violated the federal False Claims Act by making payments to the psychiatrist, Michael Reinstein, for nine years starting in August 2003.

These payments were allegedly made to induce the Skokie, Illinois resident to prescribe the rarely used generic drug clozapine, rather than Novartis AG's Clozaril, which he had been prescribing, court papers filed last March show.

Madigan said Reinstein has worked in the Chicago area for four decades and became the nation's largest prescriber of generic clozapine after linking up with Teva.

"Pharmaceutical companies must not be allowed to improperly influence physicians' decisions in prescribing medication for their patients," U.S. Attorney Zachary Fardon in Chicago said in a statement.

Teva spokeswoman Denise Bradley said the company is pleased to resolve the matter and did not admit liability in agreeing to settle. The parent company is based in Israel.

In November 2012, the Justice Department filed a civil lawsuit accusing Reinstein of violating the Medicare and Medicaid anti-kickback statute by accepting a $50,000 one-year "consulting agreement" and other benefits from IVAX, including all-expenses-paid trips to Miami for him and his wife.

That case remains pending. A lawyer for Reinstein did not immediately respond to a request for comment.

Regulators said clozapine is effective against treatment-resistant forms of schizophrenia.

But they also said it is a drug of last resort, particularly for the elderly, because of known side effects such as seizures, inflamed heart muscles, potentially fatal decreases in white blood cells, and increased mortality in elderly patients.

The Reinstein case is U.S. v. Reinstein, U.S. District Court, Northern District of Illinois, No. 12-09167.

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